Money Matters with Greg
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Money Matters with Greg
Episode 155: The Economy Remains Resilient Despite Negative Consumer Sentiment
The disconnect between market sentiment and economic reality has never been more pronounced. While headlines scream recession and investors feel like markets have collapsed, the S&P is only down about 13% from its peak – painful but far from catastrophic. This striking gap between how we feel about the economy and what the data actually shows forms the central focus of today's exploration.
After a rollercoaster week that saw the Dow surge over 1,000 points in a single session, we dive deep into what's really happening beneath the surface of market volatility. The hard economic data tells a surprisingly resilient story: PMIs remain above the critical 50 threshold, consumer spending shows strength despite inflation concerns, business investment indicators remain stable, and employment figures continue to defy pessimistic predictions.
What would signal a true economic "hard landing"? We break down the specific metrics that would need to deteriorate consistently – from PMIs dropping below 50 for multiple months to employment numbers showing significant weakness – none of which have materialized despite pervasive negative sentiment. While acknowledging the unique challenges of our current environment (nobody has traded through exactly this combination of pandemic aftermath and trade tensions before), the economic foundation appears far stronger than headlines suggest.
For investors struggling to separate signal from noise, this examination of the sentiment-data gap provides crucial perspective. Subscribe to Money Matters with Greg for ongoing insights that look beyond headlines to help you make sound financial decisions based on economic realities rather than market emotions.
Securities and advisory services offered through LPL Financial, a registered investment advisor. Member FINRA/SIPC.
The opinions voiced in this podcast are for general information only and are not intended to provide specific advice or recommendations for any individual. To determine which strategies or investments may suit you, consult the appropriate qualified professional before deciding.
Thank you week to get inspired and take control of your financial future. Let's get started. Securities and investment advisory services offered through LPL Financial, a registered investment advisor Member, finra, sipc All right.
Speaker 2:Welcome to Money Matters with Greg. I'm Greg Farrell, ceo and president of, and owner of, farrell Wealth, this wealth management firm here in Valparaiso, indiana, and the show is Money Matters with Greg. We're broadcasting live here on this fantastic Thursday. That is April 24th, and we are very, very excited about today because today is draft day. I am wearing my Bears regalia you'll see on the YouTube channel when we broadcast on our YouTube channel very, very excited about our Bears pick and tenth and we very hopeful as we always are as Bears fans Excited that next year is going to be the year, just like we always say. But I hope you are having a fantastic Thursday and very excited to have you on board here Again.
Speaker 2:This show is Money Matters for Greg. I'm Greg Farrell, and what we do on this show is talk about your money and how it matters to you in your life, uh, how it intertwines and weaves throughout your life, and we try to help add some value to your uh in overall investments, uh, as well as uh just advice on um how you can uh grow wealth, sustain your wealth, protect your wealth, talk about your charitable inclinations in life and then after death. Those are four quadrants we talk about in our wealth management group and talk about grow, protect and then distribute. So these are just some things that we talk about. So we usually have guests on and unfortunately I have not been able to have guests on because the market, the overall stock market, has been so crazy that I've not been able to get to the guests, because I really feel like everyone needs to be updated on exactly what's going on in the overall stock market. It seems like that's where the questions are from everybody and that's where we're going to go today. We're going to talk about the last two days, which has been crazy in the last Tuesday and Wednesday. I want to update you on those. And then I want to talk about what we're seeing as far as the economy goes, whether it be hard landing, soft landing I know that was the quote of the day and the term of the year last year in regards to recession and where we're going with that. I want to update everybody on those, what we're seeing, and kind of fill you in and um, and then go from there.
Speaker 2:Uh, any suggestions? Please reach out on our socials. You can find us at Farrell wealth. Uh, we are uh listed on Facebook, uh, obviously LinkedIn, uh, twitter or X, uh, as well as Instagram at Farrell Wealth. It's like Will Farrell, but he spells his name wrong. It's F-A-R-R-A-L-L. No offense to Will, he's a very funny dude, but we spell our name F-A-R-R-A-L-L and W-E-A-L-T-H and you can find us on our website. You can reach out. If you've got any questions you want us to address on this show, please, you can always email me at greg at farrowwealthcom.
Speaker 2:One quick update is the opinions voiced in this podcast and this radio show are for general information only and we're not intended to provide specific advice or recommendations toward any individual. Provide specific advice or recommendations toward any individual to determine which strategies or investments may suit you. Consult the appropriate qualified professional before deciding. That being said, we are broadcasting at WVLP 103.1. We broadcast on Thursdays at one o'clock and then we also rebroadcast on Saturdays, so this will be a recorded episode for Saturday, but we really wanted to talk to you about some of the things that are going on.
Speaker 2:First in the market. One of the places we find the majority of our news, certainly in the mornings, is a place called Sevens Report. You can find it at sevensreportcom it's S-E-V-E-N-S reportcom and subscribe to it. I'm going to kind of follow his recent mentioning or update along the lines of this. So I want to give credit where credit is due. I just sort of give you an idea of where the information comes from, where we see some of our news and where we find our news rather than just mainstream media. We tend to stay away from it as much as we can. It helps our blood pressure, for sure, and it also helps us really try to be agnostic in regards to the data and not be swayed either way and just have an opinion form, an opinion that is based on the facts.
Speaker 2:So, with that being said, monday's stock market had a late afternoon rally, which was pretty incredible. It was down pretty much in the morning, but then the S&P jumped to up two and a half percent or so and equity markets really gapped higher at the Open on Tuesday. And then the late rally Monday continued that momentum and the Dow was up over 1,000 points. It was up 2.66%, the FTSE was up 1.25%, the Hang Seng was even up 2.3%, singh was even up 2.3 um and really that was kind of what happened was the futures market overhead was overnight, was ahead of the bell on tuesday, as news wires were mostly quiet, but the angst about trump's president, trump's verbal and and written attacks against federal chairman Powell, the Fed chair Powell, it really lost some of the volatility of that trader focus that was going on and it really kind of shifted towards earnings in the busiest weeks of the quarter. Many earnings are coming through here and we're starting to see as far as that goes.
Speaker 2:So, but just an update on the markets. We had a huge day Tuesday just ahead of the open. There was a number of things of global economic forecast that were revisions and they were released by the IMF. Economic forecast that were revisions and they were released by the IMF and that saw treasuries become pretty solid. But the money flows that were kind of bolstered the morning in that advance of just that day were Closed what technicians call a technical gap from last Friday and the rally paused. So this gap fill, as you may say, on a technical basis. This was digested by traders and really there was a buying spree that just resumed with major indices rising Session highs amid reports of Treasury Secretary dissent. He gave an upbeat and optimistic comments about US and China as far as their trade negotiations. So he stated that there is a de-escalation quote, unquote and was likely and the situation was unsustainable, so big words that the market took to heart.
Speaker 2:The rally paused at the time the S&P tested at that 5,300 level and stocks turned back lower among a weak two-year treasury auction. But later in the afternoon there was sort of a less dire commentary from the Fed's Kashkari. It was one of the Fed officers and he was very well received and supported as a rebound from the afternoon lows. So we rallied and today or yesterday we rallied again. You know been pushed through here where everything was looking pretty dire there for a while. Last week was pretty miserable and a lot of people were very frustrated and stressed. So it's sort of an update on what we've done. We'll see how the rest of the week follows through.
Speaker 2:But I really wanted to talk about this gap, that is, the difference between investor and consumer sentiment and just the actual hard readings that we're seeing out there. This consumer sentiment that we're seeing is really negative and just miserable and it's been tough to get through because we're not really seeing that in the data and everyone's feeling like the market's dropped 40% or so, when it's really only down 13% of the S&P for the year and after the last couple of days it's rallied back. So it's really only down 13 percent of the S&P for the year and after the last couple days is rally back. So it's not down as much as it was. But from the peak of the top to where we are today, the Nasdaq's down in a bear market, down over 20 percent, and certainly S&P is on its way is. It's very, very close to that.
Speaker 2:So it's been painful, but there is some really negative sentiment out there and when you start looking at the major sentiment readings that include the University of Michigan, the conference board, the AII and others that have just plunged because of expectations and this trade volatility and the policies, the chaos, the concern is it's going to cause at best, an economic slowdown and at worst, a stagflation or deep recession, but we're just not seeing that. Or deep recession, but we're just not seeing that. Economic data has not really shown any of this deterioration overall and despite all of these warnings that are out there, just not seeing it. Most of the data is coming in from March, which obviously makes sense, and the trade war has escalated for sure. The policy uncertainty began all the way back in February and then obviously April 2nd was, you know, the hammer when the hammer fell. But again, all these negative expectations and you'd really expect to see at least a deterioration in the data and so far we just haven't seen that happen. So that really underscores the importance of focusing on the hard data and not just sentiment readings.
Speaker 2:And that's what we try to do. You know, when we have our investment committee meetings and we sit down and talk every tuesday morning to review, uh, the week that was and the week that could be. Tuesday morning, to review the week that was and the week that could be in the future, this is what we talk about. And so one of the things that's why I'm trying to bring and this is what we try to do in this show is bring you some of the fly on the wall conversations that I'm lucky to have in my profession, not only with clients but with friends and, you know, cohorts in the business. I've always liked to be able to. That's really why I started the show was to. I'm very privy to some incredible conversations and I think I like to share them, and that's really this is the medium that I've chosen to do it.
Speaker 2:So you know, if you go back to the US economy in the past just, let's say, go back the last five years with COVID. We really need to go. You know, the economy has defied expectations in a resilient way. First COVID, right, and then second was that rate surge we had in 2022, which is don't know if it's necessary, but we certainly had that happen. So we have to, you know, guide through it. But in both instances, analysts and experts predicted a loss of momentum and even a recession. And we're talking hard landing, hard landing, or is it soft landing all the time session. And they were talking hard landing, hard landing or is it soft landing all the time. And, however, you know, both times US economy really proved much more resilient than anyone expected. So now this is different.
Speaker 2:You know, I've been talking to clients and talking to people in the business and I've been saying you know, personally I traded through the Chicago Board Options Exchange as an independent market maker and with a group that we our Rubicon trading group that we had, where we had, you know, as many as 20-some traders come through and trade for us. You know I traded the devaluation of the peso. I traded the pharma implosion. That was 1994, 95, when the Clinton administration first came in and attacked pharma and many of the drug stocks were just halved. I traded the dot-com boom, the dot-com bust, all the way up, all the way down.
Speaker 2:We traded through a great recession, decided to launch Feral Wealth right after the great recession, which was a great idea for any entrepreneur out there wanting to start a business I highly recommend you do it during one of the biggest recessions known to man, and so that was 2008. And I had to go through that. And then a pandemic. So, okay, that was new. Nobody's ever done that before. And now a trade war. So it's all new to all of us. We've never had to do this type of things, even though we had great experience. Nobody's traded through a pandemic before. We had COVID and nobody's traded through a trade war of this magnitude.
Speaker 2:So this is a different time, these are different circumstances, and I'm not saying that a slowdown won't happen, but right now I'm just saying we're not seeing it, and recent history really does tell us to look at the hard data. So that's what we'll continue to do and you know that may change in the future, but as of now it's not. The national ISM PMIs are still showing solid activity and they're not worrying about a slowdown at all. They've maintained above 50, which is a big number and that's what we certainly watch. The number has been close and been very consistent with that 50 number. Now what signals a hard landing and what signals some of that recessionary is the ISM and services PMIs stay below 50 for at least two or three months or maybe even longer, and that would be something to pay attention to for sure. And that would be something to pay attention to for sure.
Speaker 2:The other thing is consumer spending has been resilient so far. I think there's definitely been people who have pulled back in concerns about the tariff, but retail sales were very solid in March. It sort of pushed back on the whole tariff threats and the policy chaos that was. Now we'll see what happens here in April, but it was retail sales being solid. We're not hearing any negative consumer antidotes right now from the credit card companies. Bottom line is consumer spending has really been resilient, you know, and what signals are hard landing with that is retail sales roll over and begin to drop slowly or sharply following a multi-month low within the next three months. So if you see that consistent consumer pullback in the next three months, it's definitely something to wake you up about. And then business spending has been stable New orders for non-defense capital goods, including aircraft, has been the best metric we've had for national businesses spending and investment and so far we're not seeing a steep decline in that. We'd expect to have. We'd be given all that tariff, all the tariff chaos. It certainly would expect it, but what would signal a hard landing in that would be that number. So NDCGXA is what it is. It would basically show that it was falling to a multi-month low and the next three months would be RTEL on that.
Speaker 2:And then employment indicators is another thing to look at. Employment indicators is another thing to look at. The labor market remains remarkably resilient in the face of the policy unknowns and Doge inspired federal government, employee reductions and all these other things that look like you know they're moving. They're definitely moving forward. Monthly job ads remain solid in March and while jobless claims stayed very low, they're nowhere near levels we'd expect during an economic slowdown. So bottom line is on the labor market is it's not falling apart. What signals a hard landing in that is monthly job ads. Monthly job ads would drop below a hundred thousand and um claims would go above three hundred thousand. So if you see that in multiple success, multiple months, that's really where you're gonna. You're gonna definitely again it'll, it'll wake you up. So really, the the one the thing I want to explain this is, and explain to everyone is this gap between the soft data and surveys and everything else you see out there and the hard data, that is, this economic statistics that we're starting to talk about is super wide right now and it's probably one of this sentiment is just awful, and so when sentiment goes down like this, data follows relatively quickly and that might happen next month, but right now it's worth noting that you know we haven't seen it, so you know we're not saying that the economy won't slow and that there won't be recent reports of some demise, of some premature and you know issue, but for now we're just not seeing this negative expectations follow through in the data. So I hope that helps a little bit.
Speaker 2:The show's money matters for Greg. I'm Greg Farrell, ceo and owner of Farrell Wealth. It's a wealth management firm here in Valparaiso, indiana, broadcasting on WVLP 103.1 FM and also podcasting anywhere you pod, apple, spotify, you name it Uh, we're out there. You can also find the broadcast as well on our YouTube channel uh, at fair wealth and on all of our socials um at fair wealth. If you have any questions, just as a reminder, just email me at gregatfairwealthcom.
Speaker 2:I'd love to hear from you and, uh, happy to answer any questions you have. I'd love to hear from you and happy to answer any questions you have, either on the show or on the sidebar, wherever it might be, and I want to thank you for listening today. I want to thank you for the opportunity to be able to help serve you and very excited about today, looking forward to our Bears tonight picking 10th. So go, chicago Bears Repping the apparel today for sure In the northwestern Indiana, I have to say it's probably 95% Chicago up here in this area. So Bulls, cubs, sox, blackhawks, bears for sure, and it makes it fun. So we're going to see, hopefully, our Bears turning around next year, as we are always hopeful. I hope your team does well and picks wisely tonight and I want to thank you for listening as well and we'll see you next week, see you.
Speaker 1:Thanks for tuning in to Money Matters with Greg. We hope you gained some valuable insights today, see you.
